After Donald Trump's shocking victory, our readers are now asking us, "What are the best stocks to buy when Trump is president?"
The answer is simple: Defense stocks are the best stocks to buy now, even before Trump enters the White House.
According to Money Morning Director of Tech & Venture Capital Research Michael A. Robinson, there's a huge new opportunity right now in the defense industry. While many of Trump's plans lacked specifics, Robinson says strong defense spending can be expected.
"There is little doubt that under a President Trump, the U.S. military will go on one of its biggest growth periods in decades," Robinson said on Nov. 10.
"Forget about the Bill Clinton peace dividend. Forget about wartime footing under George W. Bush. And certainly forget about our walking away from the role of world's policeman under Barack Obama," Robinson said.
The U.S. defense budget is already massive compared to the rest of the world.
The $600 billion defense budget for 2015 was more than the next seven highest-spending countries combined, according to Business Insider.
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Defense stocks were a strong investment before the 2016 election.
But they are now some of the best stocks to buy when Trump becomes president...
In a speech in September in Philadelphia, Trump announced he wants to increase U.S. Navy ships from 285 to 350.
According to Congressional Research Service (CRS) compiled data, a 350-ship navy would cost $22 billion. With Trump's other plans to increase soldiers, Air Force fighters, and missile defense systems, Forbes estimates defense spending could climb by $500 billion to $1 trillion.
But with so many options, finding the best stocks to buy now in the defense industry isn't easy. That's why Robinson has picked out three of the best stocks to buy before the Trump presidency for Money Morning subscribers.
And one of them has already climbed nearly 7% since Election Day...
3 of the Best Defense Stocks to Buy When Trump Is President
The first stock Robinson recommends is Lockheed Martin Corp. (NYSE: LMT). Since Robinson first recommended LMT in April, it's climbed 20%.
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Lockheed already had shareholders excited after its Q3 2016 earnings announcement on Oct. 25. That's when Lockheed raised its end of 2016 guidance to earnings per share of $12.10 on $46.5 billion in revenue.
Lockheed previously expected $11.15 on $45 billion in revenue.
The aerospace giant also purchased the world's leading helicopter maker, Sikorsky, in November 2015. According to Robinson, helicopters are becoming the go-to choice to help keep troops out of harm from ambushes and improvised explosive devices (IEDs).
And with its massive revenue, Lockheed likes to reward its shareholders.
Currently, LMT provides a dividend of $1.82 per share, a yield of 2.83%. LMT has climbed nearly 7% since Nov. 8.
The second stock to buy when Trump is president is Northrop Grumman Corp. (NYSE: NOC).
Our Air Force is currently using B-52 and B-2 bombers, which have been in use since the Cold War. These need replacing, and Northrop Grumman received the largest contract in history in October 2015 from the Air Force for its new long-range bomber, the B-21 Raider.
Just one B-21 Raider costs $550 million, and the U.S. Department of Defense (DoD) wants 80 to 100.
Robinson also likes the fact that Northrop is one of the top producers of intelligence, surveillance, and reconnaissance equipment and systems.
"Now that Trump is president, his border wall will be built by companies like Northrop Grumman who can deploy all the various resources to secure the border and secure the communications," Robinson said.
NOC currently offers a dividend of $0.90, a yield of 1.47%.
Robinson's third pick seems surprising. When you think of defense companies, you don't think of Microsoft Corp. (Nasdaq: MSFT).
But Microsoft's enterprise software is used by the U.S. Army, Navy, and Air Force. Those three alone comprise the tech giant's top five enterprise customers. And just from its enterprise software sector, Microsoft generates $46 billion in annual revenue.
Armed forces use Microsoft's AI-powered flight simulator in training, and Microsoft's virtual reality (VR) headset, HoloLens, could revolutionize how our military operates.
According to Bloomberg, developers have created software programs that allow commanders to superimpose battlefield maps on top of real terrain. Streamed via satellite, these blended maps help monitor troop positions and provide intelligence data.
HoloLens could also be used to help instruct surgeons on the battlefield, as well as help soldiers fix malfunctioning equipment.
Microsoft pays its shareholders a dividend of $0.39, a yield of 2.68%.
The Bottom Line: The best stocks to buy when Trump is president are in the defense sector. The defense budget in the United States was already over $600 billion in 2015, and defense spending could increase by $950 billion over the next 10 years. The three best stocks to own in the defense sector now are Lockheed Martin, Northrop Grumman, and Microsoft.
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